Wow. Version N minus k of the Greek bailout has arrived (where k is a positive integer). You can read the full text here.

I want to talk about the losers in this process.

The biggest loser is JC Trichet and the ECB. Man they really had to eat it. JC thundered "no default ever" to whoever would stick a microphone in front of him and threatened that in the event of a default, the ECB couldn't hold Greek debt. Well, now we (a) have a default and (b) the ECB will continue to hold, and add to its holdings of Greek debt. By acting like he was large and in charge when he was not, JCT has made himself look like a clown and damaged whatever positive reputation the ECB still had.

The next big loser is the sovereign CDS market. We have an obvious default, that according to my understanding (and that of the WSJ), will somehow NOT be creating a credit event. That is, holders of CDSs on Greek debt will NOT be getting payouts. In other words, the sovereign CDS market has been revealed to be a mug's game and may find it hard to survive. Governments may think they have won against the evil speculators, but all this victory will really do is drive up interest rates on sovereign debt (ceteris paribus, y'all).

The next loser is the German taxpayer, especially if the Eurolords actually follow through with their threat of a "Marshall plan for Greece".

Hey Angus! How about a word or two on the winners.

Well, Ireland and Portugal are big winners as they got the interest rates on their bailout loans cut dramatically without having to make any additional changes to policies. A good deal for them.

I also think holders of Greek debt are winners here, as they can lock in a decent return on their holdings for a not too bad haircut. I would take one of the deals.

Any other losers?

Finally and amazingly, Greece itself is again a loser in its own bailout. Some things never change I guess. They still have a mountain of debt, they still face prolonged austerity and God help them if the Eurolords follow through with their politically correct, bureaucratically bungled, economically useless version of a Marshall plan for that beleaguered island.

Abstract: Why do some voters support income redistribution while others do not? Public assistance programs have two entangled effects on society: they equalize wealth, but they also cushion people against random catastrophes (like natural disasters). The authors conduct a laboratory experiment to determine how individuals' responses to the environment are related to their self-expressed political ideology and their self-interest. The findings support the hypothesis that ideology is associated with a person's willingness to use redistribution to reduce income inequality that is caused by luck, but it is not related to preferences for inequality that are not related to luck.

In several forums I have argued that the contribution of blogs and the interwebs to our knowledge of the "truth" in news is one-sided: We don't so much learn about definitive truth as we get decisive and embarrassing corrections of bullshit masquerading as news reporting. The idea that there is "truth" is shaky; the idea that there is demonstrably false crap is where bloggers come in.

A fine example of this genre is KPC pal M.G.'s piece on shale oil. I'm pretty sure this would embarrass the Times reporter, if the Times reporter were capable of embarrassment (meaning, he couldn't be a Times reporter, I guess). The Times keeps firing its "public editor," who is supposed to be their conscience. I don't think the current public editor is long for this world, if he is going to commit actual journalism like this.

“They told us to shut it down [and we didn't know why],” 10-year-old Skylar Roberts said.

“We had told them, we understand you guys are young, but still, you’re breaking the law, and we can’t let you do it anymore. The law is the law, and we have to be consistent with how we enforce the laws,” Midway Police Chief Kelly Morningstar said.

By a city ordinance, the girls must have a business license, peddler’s permit, and food permit to set up shop, even on residential property. The permits cost $50 a day and a total of $180 per year. City officials said it’s their job to keep everyone safe and healthy, and there can be no exceptions to the rules.

“We were not aware of how the lemonade was made, who made the lemonade, of what the lemonade was made with, so we acted accordingly by city ordinance,” Chief Morningstar said.

“It’s almost like they don’t have anything better to do. I’m going to let it go. I’m trying to teach them good. I don’t think if I keep on, it’ll teach them a good thing,” Amy Roberts said.

So the law wins, and what started out as three girls’ dream of a fun summer business is now just a piece of plywood.

This REALLY makes me mad. All you folks who constantly want more rules, more laws, more government intrusion in our lives are the first say, "Awwww, that's not right!" when the police actually try to enforce the law. In fact, the reporter actually says, "So the law wins..." Um...that's what the law DOES, ma'am. The political law of the U.S. is a set of arbitrary, intrusive rules backed by overwhelming, irresistible physical force. It is the unavoidable implication of the corrupt bargain made by those who think the alternative to coercive law is the Hobbesian state of nature. Letting people make their own choices is just not an option to you folks. So enjoy your police state, and STFU.

Look, as I have written before, Chief Morningstar is right: she can't just suspend the law. The thing, the thing itself is the abuse. People who try, like this goofball, to blame the police are just mistaken. Police do not have, and should not have, discretion. It's a violation of equal protection, and in fact a violation of the very idea of rule of law, for the police to say "The law applies to you, but not to you over there."

Then what IS the solution? Get rid of about 3/4 of the stupid rules on the books. These licenses, fees, and paperwork are an important cause of extended unemployment problems.

Corporate Avenger has this pretty much right, I think. I don't fault the police. 'Cause the people that run 'em got 'em on a short leash. (Definitely NSFW, and extremely harsh. Don't watch it if you are a pussweiler)

The money quote from the video:A society that incarcerates its own population for any minor infraction where there is 100's upon 1000's of pages and pages of laws and reason for the district attorney and the local jurisdiction and the justice system to put its entire force to removing an individual from his family connection...Enforce rules made by fools Violence and fear their tools, They dress to impress thinking fear is respect And they leave us powerless.

Abstract: Is lifetime inequality mainly due to differences across people establishedearly in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime.

The quantity theory of nudity may be holding in Germany. It appears that perhaps the same amount of skin is being shown by nude sunbathers; it's just been redistributed. Now there's a lot more skin on each of the much fewer naked bodies.

Kurt Fisher, the head of the German Nudist Association, thinks he knows why the numbers are dwindling. Immigrants! Or more specifically, the wrong kind of immigrants:

""Germany is relying more and more on immigrants to keep the population steady. But many come from countries with strong religious beliefs." Immigrants who arrive from cultures where headscarves are common will not usually be interested in becoming naturists in Germany, he said."

Wednesday, July 20, 2011

Abstract: Why was economic development retarded in the Middle East relative to Western Europe, despite the Middle East being far ahead for centuries? A theoretical model inspired and substantiated by the history of interest restrictions suggests that this outcome emanates in part from the greater degree to which early Islamic political authorities derived legitimacy from religious authorities. This entailed a feedback mechanism in Europe in which the rise of commerce led to the relaxation of interest restrictions while also diminishing the Church’s ability to legitimise political authorities. These interactions did not occur in the Islamic world despite equally amenable economic conditions.

Abstract: The English Glorious Revolution of 1688-89 is one of the most famous instances of ‘institutional’ change in world history which has fascinated scholars because of the role it may have played in creating an environment conducive to making England the first industrial nation. This claim was most forcefully advanced by North and Weingast yet the existing literature in history and economic history dismisses their arguments. In this paper we argue that North and Weingast were entirely correct in arguing that the Glorious Revolution represented a critical change in institutions. In addition, and contrary to the claims of many historians, most of the things they claimed happened, for example parliamentary sovereignty, did happen. However, we argue that they happened for reasons different from those put forward by North and Weingast. We show that rather than being an instance of a de jure ‘re-writing the rules’, as North and Weingast argued, the Glorious Revolution was actually an interlinked series of de facto institutional changes which came from a change in the balance of power and authority and was part of a broader reorientation in the political equilibrium of England. Moreover, it was significant for the economy not because it solved a problem of credible commitment, but for two other reasons. First, because the institutional changes it led to meant that party political ministries, rather than the king’s private advisors, now initiated policy. Second, because these ministries were dominated by Whigs with a specific program of economic modernization.

Monday, July 18, 2011

"Cheney's Erdos number is no more than seven. He wrote his American Political Science Review article with Aage Clausen, who has coauthored with Greg Caldeira, who has co-authored with me, who has co-authored with Keith Krebiel, who has co-authored with John Ferejohn, who has co-authored with Peter Fishburn, who has co-authored with Erdos."

I can understand Chavez getting his medical treatment in Cuba. After all, the Castro brothers have the most to lose if Chavez is not longer in power. Cuba gets $3 billion plus in annual subsidies from Venezuela.

One Venezuelan blogger considers his country to be a Cuban colony:

"Cuba is very worried about its colonial outpost in South America. Things are not going well there. The Viceroy is ailing just as the province is having serious difficulties in providing the monthly stipends due to the imperial metropolis, Havana. Thus measures had to be taken before the natives become more restless than what they already are."